Gain Is Uncertain, But Expenses Fixed & Certain!

Vikram Kamat, Managing Director, VITS Hotels A part of the Kamat Hotels India, VITS Hotels is a new luxury business hotels chain having hotels in Mumbai, Pune, Aurangabad, Bellary, Latur, Nashik, and Ankleshwar, each equipped with all modern facilities & amenities.

'Things have become so expensive,’ said Chandrakant, my Executive Director who heads hotels and restaurants. As we planned for the coming years’ budget and tried to grapple with the costs that have quite simply ballooned. All this while fundamentally business doesn’t seem to be stabilizing with all the disruptive changes in the economy.

Disruptive changes not because of innovation by some startup or competition, but rather disruption to the ultimate controller of the Economy i.e. the government. And while we might always have things to complain and be upset in business one of the key lessons I have learnt is to focus on reducing costs. This is because costs always seem to be rising. And everyone in the organization has multitude of reasons, explanations and justifications on why we should be paying more. Right from ‘Sir Quality comes at a price' to 'sir you know how much input costs have gone up in this area'.

Now I’m surely not the one to compromise, not at all. Rather, im trying to highlight the importance of focusing on Wastage. Everyday, there are countless areas where money is being lost, through wastage. These are things that don’t give value to either the customers or the company. It's as I said sheer wastage. Switching of the air-conditioning in offices when not needed is just one small example. Something that we know but we all need frequent reminding. But think of the countless other areas that you can stop wastage.

In the U.S.,I know of Starbucks that saved thousands of dollars by simply tweaking their machines so as to stop the extra milk that would drip, from the cappuccino machine to stop dripping. Or the case of United Airlines, which stopped the olives
wastage in the salads they were serving, to end up saving over $40000.

We hire expensive consultants, who basically come with a fresh eye; with fresh perspective on potential costs savings which are nothing but wastages which we had simply become used to! Perhaps a simpler exercise would be to ensure that these hi fi MBAs can be given a specific task of a department asking them to submit a report directly to top management on how their department can save costs by 15 percent. And then implement the top 3-5 ideas. Since they are fresher’s, they have no eggs to grind, nor are accustomed to the working of the routine. Hence they can take a more objective call on what is being wasted.

In this day and age of 'Asset Light' which is the fancy of all investors, it is imperative to focus more on the wastages that may not be producing any value

Capex is the most abusive word today for most CFOs. In this day and age of ‘Asset Light’ which is the fancy of all investors, it is imperative to focus more on the wastages that may not be producing any value. Im reminded of Benjamin Franklins quote - is easier to build two chimneys than to keep one in fuel”. Because keeping profitably intact is always the main challenge (well unless you’re one of the new age so called startups or so called tech companies, who are apparently mandated to lose money!)

So if your not one of those startups and / or tech companies, then you need to manage that chimney. Focus on the wastages within the business big and small. One of the areas that are commonly looked at nowadays is ‘Digitization’ and while I’m for digitization and so called paperless, both are not always a good thing. For many applications, Paper or low tech options are far better. Not only because of the other cost of digitization. I mean think of all the power consumption by the computers, servers and subsequent air-conditioning. How many phones, chargers and extra batteries do we need and carry. I have found it better to have areas like marketing materials and samples as it’s always easier to browse in hard copy than going through vast number of files on the computer. Think of the cost of licenses and the cost of AMC being paid to each vendor. While im certainly not advocating avoiding or stopping any of these I feel many areas costs can be reduced by focusing on what’s really required.

Often when I cross the many buildings in BKC Mumbai while going for dinner, I see whole host of them with their lights on. This is done so that the house keeping guys can clean the premise as can be seen cleaning through the glass windows. But irrespective of which location they are cleaning the lights are on in the entire building including the glamorous conference rooms. While cleaning, all that’s needed are 50 percent of the lights. That if saved everyday for the entire building is direct profit and potential money that can be used elsewhere.

Simple things of wastage like this can be identified throughout the organization and must be done on a continuous basis. Just like deep breathing, wastage reduction is something we all know but to be reminded constantly. That benefits us all.